CSX Rides The Reading Railroad (CSX, UNP, BNI)

CSX Corp. (NYSE: CSX) is trading higher after the railroad operator increased its 2008 and long-term financial guidance.  It sees Fiscal-2008 earnings of $3.65 to $3.75 per share, which is above its prior $3.40 to $3.60 range and above the consensus of $3.57.  The railroad is also increasing its 2008 capital spending to approximately $1.75 billion and expects free cash flow before dividends of about $1 billion.

The company also sees the strong momentum continuing beyond 2008 and israising long-term guidance through 2010.  Its sees compounded annualgrowth in operating income of 15% to 20% over the 2008 base, which isabove its prior guidance of 13% to 15% growth over the 2007 base.   It also predicted compound annual growth in earnings of 20% to 25% over the 2008base,  ahead of prior guidance of 18% to 21% growth over the2007 base. 

Shares are up 3.9% at $57.09 in early pre-market trading today.  Its52-week trading range is $38.09 to $70.70.  CSX is not the largest ofthe railroad operators in the U.S., despite a $22+ billion market cap. 

Union Pacific (NYSE: UNP) is indicated up 1% and its market cap isnearly double CSX’s at $40+ billion.  Burlington Northern Santa Fe(NYSE: BNI) is actually indicated to open flat today.  Most of theserailroad stocks traded up yesterday after a UBS upgrade in thesector and after the FedEx raised guidance helped many transportationstocks whose main variable cost is energy and materials.  This may begapping up, but it won’t be a huge shock if some sell the news basedupon some of this data being factored in. 

Jon C. Ogg
September 11, 2008